Member Info for Malik-

Video describing the Eversholt partnership below. To me, clear synergies with SGN agreement, actually.

https://m.youtube.com/watch?v=brrsg-_jfr4&feature=youtu.be

Eversholt Rail is a company with assets worth £2bn.
=> Another fantastic partner.
It’s a significant railfleet owner in the UK, and is a spin off from British Rail, when it privatised in the 90s.

As a reminder, Getech/H2Green now have 3 MoUs - with tier 1 partners:
1) SGN (assets £6bn)
2) Eversholt (£2bn)
3) Element2
And two of those, were signed this year - and since the announced takeover by Getech; showing that H2Green is clearly delivering and at speed.

Yet again, the market is barely assigning any value to the massive hydrogen opportunity in the Getech shares; nor does it believe the legacy business of Getech (pre H2Green) will ever recover from Covid trough in 2020 (despite having reached an inflection point as I discussed in prior posts).
=> GREAT ENTRY POINT - BUY

The c30% mining difficulty adjustment is a GAME CHANGER; since could take 6-18m for hashrate to fully recover.
Once ARB’s new machines arrive early Q4, at $40k Bitcoin annualised vals PRE-Texas:
-PE: 6.5x
-EV/EBITDA: 4x
CHEAP
Imagine multiples if Bitcoin back at $65k

Yet stock is down=> Makes NO SENSE.
BUY!

New updated slides showing Centerbridge Partners with 6.2% and JPM with 3.3%.
I didn’t see these names in earlier slides.
Ceterbridge is a special situations fund.

I think a Capital increase may be less likely at a time when Bacanora is in the process of being taken over…
Anyhow, worth having a look at EMH share p post 3 Feb (when they had their last capital increase) - EMH stock went up in a straight line by 70% after that…

(I of course disagree on Zinnwald - it’s a hugely undervalued asset, and it’s just seeing the re-rating which was well overdue... feel free to join the zinnwald board for extensive discussions there about the investment case and what’s changed as of late).

*March

I genuinely think Lithium stocks will do brilliantly this semester. It’s a sector that’s moved out of favour since Feb/Mrs h despite Li prices rising, it also remains under the radar still of many.
Prices are rising, and market is only getting tighter- hydroxide at 16k, and people talking about 20k this year. Clearly, share prices haven’t even factories in the rise in spot prices as yet, let alone a 20k possibility.
I am loaded on lithium, with my main holdings by size : 1) EMH, 2) ZNWD, 3) Infinity (burned on crash, added recently).
EMH is moving slowly. But upside here is evident >2x on $15k hydroxide. Expect doubling in share p as soon as offtake announced. People clearly not believing this is on the cards any time soon - they are likely to be proven wrong, I am convinced the govt will deliver on battery project and so offtake before elections in Oct.
Then ride up the leverage to the lithium p.

(If anything these conclusions are even more positive for read across of takeover multiples)

Thanks.
Re BCN and Candence ownership of Sonora: To be fair I wasn’t aware of the points you made - so thanks for asking and flagging - and we’ll spotted. I just looked into it.
It’s indeed complicated.
Have a look at p122 of technical report of Sonora they give breakdown of the resource size by tenure.
The asset under Jv at 70% BCN actually make up the buk of the 8.8mt resource (4.9mt out of that).
One can deduce from that, that Cadence share of the resource is around 1.5Mt or 17% in total.
The share of FS Sonora production is lower. Indeed, it is assumed 88% of mined ore will come from La Ventana concession - which is the portion not under JV.
So actually, my estimates of valuations of implied takeout price for Sonora are slightly understated.

So the published feasibility resource was 0.755Mt.
They just added a massive exploration license on 18 June.
They don’t disclose the exact number of group resources now on LCE basis per se, but you can back it out.
Read the recent press release by the company of 18 June on the exploration license, and also read the AGM press release of this week.
I may be underestimating slightly in my number above.
They say in AGM press release it adds 50% of group lithium resource (which would actually give you 1.13mt LCE figure). I calculated 1.04mt LCE based the 18 June release).
Anyway, you get the ballpark figure.

Not quite in agreement.
Bacanora have a 8.8mt LCE resource owned at 50%, so 4.4m effective share.
Zinnwald with recent explo license has around 1.04Mt LCE owned at 100%.
Effective share difference of resource is 4x not 6x.
It wasn’t that obvious, Bacanora is clay, which to me is more questionable of a resource type than ZNWD/Cinovec.
Again, one needs to make the Npv calcs comparable. You need to use the same Li price across the companies you analyse and adjust published NPVs for your assume Li price accordingly. Second and again I disagree with using 8% cost of capital for Mexico and Ghana - those countries to me merit a higher cost of capital to European and North America projects. So I adjust for that.
Bacanora is being bought out at 60% Npv. They offered a 55% premium to share price of BCN just prior to that announcement. So actually BCN was trading at 35-40% NPV just before the announcement. Mind you, Ganfeng was smart to get BCN do a discounted rights issue just before announcing a takeover to lower the price.
We are trading now at around half that npv vs BCN at 35-40% prior to takeout announcement.

1) I adjust all NPVs I mention above for hydroxide p at $15k - so this raises the published Npv numbers vs those reported in the studies (the ZNwD published Npv at time of report was usd350m); which were done at lower Li prices typically. I also adjust published Africa/Latam assets NPV to factor in a 10% cost of capital. I disagree they should be valued at the same 8% cost of capital as European/North American assets. I deduct the cash.

*immediately

Your reasoning assumes the stock was accurately priced at acquisition announcement. That was far from being the case - and is still far from being so. It also assumes a fair value paid for the asset by ZNWD. They effectively got a gift.
Since the minority buyout:
1) The company doubled its flagship asset - and traded immoderately after the announcement at 8%NPV - this is an advanced Feasibility stage project. This is more advanced that EMH, and is at the same stage as Bacanora’s Sonora.
2) The company raised its total resources by another massive +50% on top of the above, in the last couple of weeks which the stock had not reacted to.
3) This is an M&A target - with all eyes on what happens to the stake - when Gangeng buys out BCN.
4) Being an M&A target you warrant a PREMIUM valuation not a (significant) discount to peers
5) There are plenty of synergies in consolidating the resource with Czech side Cinovec
6) As I said yesterday - Ganfeng’s implied take out price of BCN values the Sonora asset at c60% NPV. A similar valuation was offered by Piedmont for Ironridge’s Ghana resource. We’re trading at 4-5x less than that; and again, are a takeover candidate.

Piedmont today announced taking a c9% stake in Irronridge.
It also, announced an option to take 50% stake in IRR’s Li flagship project in Ghana.
On my numbers, the implied takeout value offered for the majority stake in that project comes out at c56% of NPV.
This is valuation is not too dissimilar to that offered by Ganfeng for Bacanora’s Sonora.

EMH currently trades a bit below 25% of NPV (I assume hydroxide at $15k).
So you get the idea of upside here, and that’s before factoring-in likely higher upcoming Li prices).

By the way; on my calculations, Piedmont is offering an implied valuation of c56% NPV for the majority stake of IRR’s flagship project in Africa - not too dissimilar to multiple of that offered by Ganfeng for BCN’s Sonora asset.
Again, compare those numbers to where ZNWD currently trades…

Well there is plenty of action going on on the Lithium space right now, yet the sector is still out of favour compared to Feb/March.
We have had news from IRR today; but also just recently Infinity Lithium, ASX listed, getting a preliminary conditional offtake from LG. This is huge news particularly since Inifnity Lithium’s asset in Spain was/is virtually close to being binned as a project because local politics. Therefore says a LOT about the importance and scrambling of securing supply.
We also know, VW is looking to secure something soon; and we ve started to see action on M&A (Ganfeng especially active recently)
Meanwhile, hydroxide prices are now at high of >$15k - and keep on rising on tightening supply. It is set to only get tighter from here, with some talking of $20k price by year end.
Yet Li stocks still by and large well below their peaks earlier this year.
Great place to be - H2 will be solid for Lithium equities.
ZNWD being a more advanced project, trading at big discount to peers and being an M&A target too is a perfect choice for BIG re-rating, and sector outperformance.

Bacanora just held its AGM.
There was an investor question that read as follows: ‘Do Ganfeng value Zinnwald’s potential?’
For obvious reasons, Bacanora declined to answer the question and just said ‘Ganfeng’s views on Zinnwald is a question for Ganfeng’.
What’s key here is investors are starting to make the connection. Plenty of large institutionals are holders of Bacanora - and these assisted to the call/were present at the meeting. This will make them look more closely at Zinnwald investment case: positive for our share p.

Again, to me, Ganfeng just won’t sit idle on the stake. They either sell or buy us out. In any case, we are an M&A target and this warrants a valuation premium. And yet, the market still prices us at a significant discount (see my earlier post). This will have to change.